The series 2014 bonds, expected to price
In addition, Fitch affirms the following ratings at 'A+':
The Rating Outlook is Stable.
The bonds and COPs are secured by a pledge and lien on the net revenues of the electric system.
KEY RATING DRIVERS
GROWING SERVICE AREA:
CONTINUED IMPROVEMENT IN FINANCIAL METRICS: Fiscal 2013 and unaudited 2014 financial results show signs of continued financial recovery as the result of a concerted effort by management to implement rate increases and to strengthen operations. Fitch-calculated debt service coverage (DSC) is still low as compared to the rating category median, but expected to stabilize at around 2.0x.
INCREASED LIQUIDITY: Unrestricted funds increased to 150 days cash on hand (DCOH) at fiscal year-end 2013. This is a significant improvement from a low of 38 DCOH at fiscal year-end 2010 and inline with the current rating category median. Liquidity should continue to improve, given a targeted rate stabilization fund balance of at least 40% of operating expenses.
MINIMAL FUTURE DEBT PLANNED:
SIZABLE MARKET PURCHASES, NO ADJUSTOR: The utility's rate structure does not include an automatic adjustor to capture changes in power costs, which could result in a lag in cost recovery if market prices increase unexpectedly. A large portion of
MANAGEMENT OF RATES AND COST RECOVERY: Management of rates to ensure timely cost recovery and maintain stable financial performance is key to the rating, especially given
The city owns and operates the electric distribution system, serving all customers within the city's 43 square miles. The utility served 55,600 customers in fiscal 2014, a 1% increase over 2013. Energy sales saw a slight decline of less than 1%, due to conservation efforts, after two years of energy growth.
ACTIVELY MANAGED POWER SUPPLY
The utility's 2014 power supply was provided from a combination of output from its owned natural gas plant (52%), power received under long-term contracts with
Roseville made large market purchases in 2011 and 2012 (approximately 50%) due to the exceptionally low price of power. Purchases decreased sizably in 2013 and 2014 (19% of 2014 power supply), due to low hydropower availability and economic owned generation. The utility projects that market purchases will continue to decrease as energy usage lessens and market prices begin to rise.
IMPROVED FINANCIAL PERFORMANCE
Financial metrics have rebounded and show significant signs of improvement.
Additional information is available at 'www.fitchratings.com'.
--'U.S. Public Power Peer Study --
--'U.S. Public Power Peer Study Addendum' -
--'U.S. Public Power Rating Criteria' (
--'2014 Outlook: U.S. Public Power and Electric Cooperative Sector' (
2014 Outlook: U.S. Public Power and Electric Cooperative Sector (Calm Under Pressure)
U.S. Public Power Rating Criteria
U.S. Public Power Peer Study --
U.S. Public Power Peer Study Addendum -
Source: Fitch Ratings
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